The Appleization of Finance: Reflections on the FinTech (R)evolution

“[C]apitalism is a complex, adaptive system which has reached the limits of its capacity to adapt” (Mason 2015: xiii)

In his book Postcapitalism (2015), the British journalist Paul Mason criticizes the ‘who is who’ of erstwhile revolutionary thinkers for their failure to anticipate the flexibility of the capitalist system. At the same time, however, the main (and somewhat puzzling) claim of Mason’s argument is that the currently unfolding ICT revolution is going to bring about the end of capitalism as we know it. Although we acknowledge the revolutionary potential of ICT, in this working paper we draw more cautious conclusions.

This working paper (submitted to Finance and Society) is tied to the research project ServiceBrussels. Amongst others drawing on insights from the literature on global and world cities, this project investigates the locational activities, spatial makeup and temporal evolution of advanced producer services (APS) – financial institutions, law firms, accountants, consultants – in and around Brussels. Besides mapping the geographies of the Brussels’ APS complex based on company and employment data, we also conduct in-depth research of APS firms and networks with regard to financial centre development. In so doing, we stumbled upon the emergence of a FinTech (financial technology) cluster or hub in the Brussels periphery, sponsored by Belgium’s largest banks and other key APS players, such as McKinsey and Company.

In essence, the rise of FinTech is said to bring about new business models based on the integration of finance and information and communication technology (ICT). As the FinTech ‘revolution’ promises to radically change financial services, potentially revolutionizing the ways in which the larger APS complex functions, FinTech quickly became one of our in-depth cases. After some initial research we quickly realized that our empirical investigations might well be served with a more conceptual understanding of our research object. This is how this working paper was conceived.

Many studies (typically produced by APS firms) argue that FinTech startups are set to ‘disrupt’ the ways in which traditional financial services are conducted, potentially shaking up – Überizing? – the existing financial sector (see here for a recent example). Although we certainly agree with the disruptive potential of FinTech, we argue that the existing financial sector – incumbent finance – might not become extinct or obsolete due to these developments, but instead might be able to strengthen its existing sway as a result. For big banks and other large financial players are currently embracing FinTech firms at record speed (indeed, if you can’t beat them – join them!), thereby internalizing and utilizing the disruptive energy of FinTech startups for their own ends.

This working paper therefore argues that we need to be more sensitive to how incumbent financial institutions themselves have started to mimic the disruptive FinTech firms they seek to neutralize. Organizational models coming out of Silicon Valley are starting to spill-over into the existing financial industry. Playing on previous research on the financialization of Apple, we call this process ‘the Appleization of finance.’ Emblemized by Apple Inc.’s business model, organizational technologies rest on the lead firm cultivating and monopolizing an infrastructure, creating an ‘ecosystem’ and/or ‘walled garden’ where start-ups are ‘free’ to compete whilst effectively being ‘locked in’ in the process. This paper illustrates this through a threefold analogy between Apple’s strategies – locking in software developers, customers, and the state into its business ecology – and emerging practices in the financial industry. As said, the analogy suggests that the Appleization of finance might transform, yet not undercut the oligopolistic position of the financial incumbents riding the latest wave of technological change.